Series - Board conduct

It is time to focus the efforts on the Board and its recent conduct. This will be part of a series, which you can follow in the tags to the right. This series will be marked “Series-Board conduct”

We want to start with PriceWaterhouseCoopers (PWC)’s guidance and highlight several issues as we read through it. You can find a copy of “Director’s Handbook, The New Zealand working guide” here.

Page 11 deals with Governance Duties and states as follows,

Therefore it is required that a long term strategic plan is in place for PGC and investors were led to believe as much when a clear strategic plan was announced for the “New PGC” in April 2011 only to be discarded several weeks later as clearly argued in this post.

Page 12

How is this possible in light of the material covered in above mentioned post of which the most important points are…

On 29 April 2011 the PGC Board (Chairman Bryan Mogridge and fellow directors Bruce Irvine, John Duncan and George Kerr) communicates as follows in its prospectus,

and….

 

     On 30 May Heartland shares were returned to shareholders and on 14 June 2011 PGC announces that instead of returning surplus cash to shareholders PGC will be participating in the Heartland share placement and $55m capital raise plan. So 15 days after returning Heartland shares to PGC shareholders, management goes straight back into Heartland, with borrowed money. Another step which contradicted the above mentioned strategy follows less than two weeks later when on 1 July Bryan Mogridge announces PGC will participate in the EPIC bank restructuring to the tune of $14m.

How would the Board argue did they adhere to the above mentioned governance guidelines?

We cannot see how it can be the case when considering the strategic direction of the “New PGC” was announced in a prospectus and on p.16 of the handbook it states,

At what point does a statement become deceptive? In this case it is a serious question, but it has to be asked. How can you, as a Board, set a clear direction of focusing on the wealth management business and returning excess cash and public holdings to shareholders and within weeks start to reverse course?

Then finally on p.17 it discusses issues around Acquisitions, mergers and divestments and takeovers.

Firstly, the chairman Bryan Mogridge had to be asked by shareholders to guide them at the time of the takeover approach on what they should do with their shares and only then did the “independent directors” come forward with guidance.

Secondly, we are totally unaware of any tactics that were used to secure a better deal for shareholders by the independent directors Bryan Mogridge and Bruce Irvine. Actually Bryan Mogridge recently encouraged shareholders to considering doing something which in our opinion amounts to speculating in PGC company stock.

The public record is by no means conclusive, but it does seem to indicate that Bryan Mogridge and fellow director Bruce Kerr did not monitor or were concerned with the PGC shareholder register as can bee seen from the following,

Asked if Baker Street Capital might do something similar at PGC, PGC chairman Bryan Mogridge said: "I don't think so but who knows." Asked if he thought Baker Street might make a takeover offer, Mogridge said: "You can speculate all you want but you won't know until they do something, if they do anything at all."  Asked if they were friendly Mogridge said: "So far. I see no reason why they would want to do anything else. I think they will be OK. They are not a huge fund." …

We are not alone in our concerns; see Chalkie’s discussion here

Cheerio,

jA

Anderson Cooper once said, I think it's a good thing that there are bloggers out there watching very closely and holding people accountable. Everyone in the news should be able to hold up to that kind of scrutiny. I'm for as much transparency in the newsgathering process as possible.